Yes, your teacher was wrong, wrong, wrong.
Her position of authority gives her power OVER her students. It's the same in all sexual harassment; taking advantage of vulnerability with inappropriate touching or comments.
Your teacher was getting her jollies, talking about her dreams to see what the reaction of the male students would be.
Why else did you "laugh it off?"
"Why else did you "laugh it off?"
I think because I was unsure how to react.